Beef in 2014: Demand bright, local supply tight

New
Zealand’s beef industry faces brighter prospects in 2014
with strong international demand, combined with tight local
supply, according to a new report released by agribusiness
banking specialist, Rabobank.

The report, Beef in 2014:
Demand bright, local supply tight, says the decline in beef
production, particularly in lean beef, in the United States
– New Zealand’s largest beef export market – means New
Zealand product will be in demand.

However, the Rabobank
report cautions, in other less traditional markets – where
cost is the primary determinant – growing competition from
India should be expected, with increased local Indian supply
available for export.

“New Zealand beef production is expected to be
lower in 2014 compared to the drought-affected production of
2013,” Mr Costello says.

“Improved seasonal
conditions in the second half of 2013 has helped turn around
the fortunes since the peak of the drought and has set
things up for an improved spring and summer for 2013-14. The
overall increase in processing levels through 2013 was the
direct result of a high cow kill, as more cows were carried
over from 2011/12 due to favourable pasture conditions in
New Zealand.”

Mr Costello says New Zealand’s beef
production is likely to be limited due to the expansion of
the dairy herd, although beef cattle numbers are not
expected to decline greatly in the coming years. The rapid
incremental growth in dairy numbers witnessed over the past
decade is expected to slow as pressure from suitable land
availability and increasing emphasis on environmental
regulations grows.

Competitor watch in 2014

Exporters
will see increased interest from the US while increasing
competition from India will likely limit growth in exports
to a number of South East Asian and Middle Eastern Mr
Costello says although beef supplies from New Zealand are
expected to tighten in 2014, total beef production globally
is forecast to remain relatively steady compared to US
hungry for beef

The US will experience a significant
decline in beef production in 2014, the report says.

“The urgency to rebuild the US herd is becoming
ever more pressing due to the ongoing liquidation occurring
over the past three or so years,” Mr Costello says.

“If weather permits, US producers will need to grow
cattle numbers which are now at 60-year lows. With tight US
supply forecast for 2014, this will help drive strong demand
for New Zealand product.”

Indian buffalo meat exports
to remain strong Increasing exports of Indian buffalo meat
in 2014 will target South East Asian markets, according to
the Rabobank report.

“After becoming the world’s
second-largest bovine exporter in 2012, the growth in the
Indian buffalo meat shipments continued throughout 2013,
increasing four per cent, or 22,000 tonnes swt, in the first
six months of 2013,” Mr Costello says.

“Of particular
importance is India’s continued push of buffalo exports
into markets such as Vietnam and Thailand presumably through
grey channel for re-export to China.”

Asian market
dynamics

Despite competition from the US for New Zealand
product, exports to China are forecast to remain strong in
2014 as China will continue to face a supply deficit,
creating strong demand for imports.

Rabobank expects
Brazil to regain formal access to the Chinese market in
early 2014, which will give China the opportunity to
diversify its supply base. New Zealand currently accounts
for 18 per cent of China’s formal imports.

Rabobank New
Zealand is a part of the international Rabobank Group, the
world’s leading specialist in food and agribusiness
banking. Rabobank has more than 110 years’ experience
providing customised banking and finance solutions to
businesses involved in all aspects of food and agribusiness.
Rabobank is structured as a cooperative operates in 42
countries, servicing the needs of approximately 10 million
clients worldwide through a network of more than 1600
offices and branches. Rabobank New Zealand is one of the
country's leading rural lenders and a significant provider
of business and corporate banking and financial services to
the New Zealand food and agribusiness sector. The bank has
32 branches throughout New
Zealand.

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